Income-seeking investors are taking a closer look at dividend-paying exchange traded fund options in the ongoing hunt for returns in a low-yield environment. Many dividend ETF searches begin with the largest funds by assets with a diversified approach.
Matt Krantz for USA Today explains that ETFs are investments similar to mutual funds that hold a basket of stocks. Dividend ETFs allow investors to buy an index of companies rather than choosing individual stocks. [S&P’s Best Dividend ETF Picks]
With the multitude of dividend ETF options available, it is not always clear which ETF is right for an individual’s portfolio. For example, take the Vanguard Dividend Appreciation ETF (NYSEArca: VIG) and SPDR S&P Dividend (NYSEArca: SDY). [Dividend ETFs Without the Label]
The providers of the funds, Vanguard and State Street Global Advisors, are both industry leaders in ETFs. [Dividend ETFs See Performance Diverge on Sector Allocations]
In comparing dividend payouts, the Vanguard ETF has a 12-month yield of 2.35% compared to the 3.56% found in SDY. While SDY has the more attractive yield, VIG’s holdings include companies that have raised dividends at a quicker pace. According to Morningstar, VIG yields have risen over the past few years, while SDY has seen its yields fall, according to the USA Today report. [Dividend ETFs Under the Microscope]
Additionally, VIG has experienced lower volatility and risk compared to SDY, as measured by their standard deviations. [Choosing the Right Dividend ETF]